Belt and Road Initiative – A Strategic Pathway

What is the Belt and Road?

The Belt and Road Initiative (BRI) was announced in 2013 by Chinese President Xi Jinping. BRI promotes closer ties between countries through development led trade growth. This requires a massive infrastructure construction programme complemented by bilateral commitments covering trade and investment. BRI is also regarded as a significant geostrategic initiative, which reflects China’s changing status as an economic and military power.

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At the 19th National Congress of the Communist Party of China held in Beijing in October 2017 the BRI was embedded within the Constitution. This demonstrates the importance and permanence of BRI within the Chinese system.

The growth in New Zealand’s trade and investment with China has been critical to our relative economic prosperity since the Global Financial Crisis. This growth has been built off the success of the Free Trade Agreement (FTA), which entered into force in 2008.

How can New Zealand Benefit?

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In March 2017, New Zealand and China signed a non-binding Memorandum of Arrangement (MoA) under which the countries agreed to work together in specified areas including upgrading the FTA, expanding trade and investment and to develop a pathway for cooperation and exchanges to support the BRI.

The scale of the BRI is hugely ambitious. The estimated cost of BRI projects is expected to be approximately US $2.5trillion over the next decade.

BRI related infrastructure development is changing the flow of goods around the globe. These changes have the potential to impact on the flow of New Zealand’s trade into China.

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69 countries and organisations have expressed interest in co-operating with China in BRI. The vast majority of those countries have focused their attention on infrastructure. While infrastructure may eventually be a feature of BRI in New Zealand, our location and advanced economy status creates an opportunity to examine alternative approaches that may offer more immediate and scalable potential and play to New Zealand’s comparative advantages.

BRI is dynamic and continues to evolve as the priorities and interests of China and other Belt and Road countries change. It is helpful to think of the Belt and Road Initiative as an evolving concept as opposed to a tightly defined and rigid project.

BRI has grown from its original infrastructure foundation to now encompass a much broader vision, including sectors such as health, education and digital.

The changing nature of BRI means it is challenging to clearly define BRI and the opportunities it presents. However what is clear is that BRI is at the very core of China’s country to country relationships. Proactive engagement with BRI demonstrates an understanding of the importance of BRI to China. The breadth and inclusiveness of BRI means that countries can decide for themselves the extent to which they engage with BRI.

Why should New Zealand get involved?

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Having signed the MoA New Zealand has already expressed interest in the BRI. We must now determine the depth and breadth of our engagement.

This gives us an opportunity to protect our hard won and valuable relationship with China, a relationship that may otherwise be at risk of “preference erosion” as China is likely to focus its resource and attention on countries that are fully engaged with the Belt and Road. We also need to be alert to the implications of a fundamentally bilateral initiative for the region’s trade and economic architecture, which could be hugely significant for small countries like New Zealand.

The New Zealand China Council (NZCC), together with a number of partners, has commissioned this report from PwC to set out a range of options focused on “connectivity” for how New Zealand can engage with BRI.

The New Zealand China Council’s intention is to enable better understanding of BRI and catalyse an informed discussion of the available options open to New Zealand.

This will contribute to the development of the working plan as required by the MoA and enable informed decisions around how New Zealand engages with China’s Belt and Road Initiative.